IndusInd Bank Board To Come Up With CEO Replacement In Six Months, Sources Say
Following the disclosure of the derivatives portfolio discrepancies, Kathpalia had acknowledged that the RBI had expressed dissatisfaction with his leadership skills in managing IndusInd Bank.
Private sector lender IndusInd Bank's board will need to come up with replacements for Chief Executive Officer Sumant Kathpalia by October, according to two people familiar with the matter. Once the potential CEO names are submitted, the Reserve Bank of India will finalise Kathpalia's successor.
The regulator's messaging has been clear in the IndusInd Bank matter, where Kathpalia has only been given truncated terms two times in a row, the people said. In such situations it is clear that the RBI is unhappy with the manager's performance at the bank, they added.
The bank's board will now have to hire a head hunter to get potential CEO names, which it will then review and prepare a shortlist. It is unclear if only external names will form part of the shortlist or if any internal candidates will be considered. As such, Deputy CEO Arun Khurana is also incharge of the treasury and finance functions at the bank, where the accounting discrepancies have been found.
Typically a bank's board must submit potential CEO names to the regulator at least six months before the incumbent's tenure ends. This ensures that there is enough time for the regulator to review names and appoint an appropriate successor.
The RBI is awaiting an accountability exercise to be completed before taking action, the people quoted above told NDTV Profit on the condition of anonymity. In case any serious accounting lapses are found at IndusInd Bank, the regulator will then take action against those responsible.
On Thursday, the IndusInd Bank board said it will appoint an independent firm to review its accounting policies and find the people responsible for the lapses at the bank.
The people quoted above added that the lender's board has to adopt the independent agency’s report before submitting it to the country’s central bank. RBI would take action on the basis of what the board accepts as reasons behind the lapse.
The development came after the bank disclosed on March 10, that it had discovered certain discrepancies in its derivatives portfolio. The bank had estimated a financial impact, which is the equivalent of 2.35% of the bank's net worth as of December. This amounts to Rs 1,500-2,000 crore.
Besides, RBI has urged IndusInd Bank Ltd.'s Chief Executive Officer Sumant Kathpalia and Deputy Chief Arun Khurana to step down following accounting lapses in its derivates portfolio, Reuters reported on Friday quoting four people familiar with the matter, adding that Kathpalia and Khurana will step down as soon as replacements are found.
IndusInd Bank’ spokesperson on Friday clarified that that the recent media reports regarding the tenure of the Bank’s CEO and Deputy CEO are factually incorrect. “The Bank strongly denies the claims made in these articles. The information circulating is entirely inaccurate and does not reflect the true situation,” the lender’s spokesperson said in a statement.
Following the disclosure of the derivatives portfolio discrepancies, Kathpalia had acknowledged that the RBI had expressed dissatisfaction with his leadership skills in managing IndusInd Bank.
Notably, earlier this month, RBI approved the re-appointment of Kathpalia as the managing director and CEO of the bank for another year instead of a three-year term that IndusInd had applied for.
